Chinese industrial sector energy-efficiency policy has gone through a number of distinct phases since the founding of the People s Republic in 1949. An initial period of energy supply growth in the 1950s, 1960s, and 1970s was followed by implementation of significant energy efficiency programs in the 1980s. Many of these programs were dismantled in the 1990s during the continuing move towards a market-based economy. In an effort to once again strengthen energy efficiency, the Chinese government passes the Energy Conservation Law in 1997 which provides broad guidance for the establishment of energy efficiency policies. Article 20 of the Energy Conservation Law requires substantial improvement in industrial energy efficiency in the key energy-consuming industrial facilities in China. This portion of the Law declares that "the State will enhance energy conservation management in key energy consuming entities." In 1999, the industrial sector consumed nearly 30 EJ, or 76% of China's primary energy. Even though primary energy consumption has dropped dramatically in recent years, due mostly to a decline in coal consumption, the Chinese government is still actively developing an overall policy for energy efficiency in the industrial sector modeled after policies in a number of industrialized countries. This paper will describe recent Chinese government activities to develop industrial sector energy-efficiency targets as a "market-based" mechanism for improving the energy efficiency of key industrial facilities.